The much publicized comments from Jim Rogers about the unattractiveness of sterling, and his view that era when the City of London could claim to be the financial capital of the world is over, could bring one issue, which does not receive the attention that it should, to the surface, and which may bring about some tension in the so called “special relationship” between the UK and the US. The UK is showing no desire to participate in a new international crackdown on financial secrecy and tax havens by more than 50 countries.
As reported in the Guardian newspaper on January 22nd, 2009:
Failure to participate in the formation of the new Taskforce on Financial Integrity and Economic Development, launched in Washington DC this week, is part of a pattern of UK opposition to key financial transparency reforms. Richard Murphy, the forensic accountant who is a key member of the taskforce, said: "The UK was invited to participate. They haven't and they show no indication that they will engage with this. Other European partners are interested and we've seen what's happened in the States. It's obvious Obama is interested yet the UK remains coolly indifferent."
If the Obama administration and the Europeans, especially the French and German governments, are serious about cracking down on the labyrinth of offshore tax havens and the conduits that allow corporations and individuals to avoid paying tax and having to be transparent about their accounts, this will put them on a collision course with the Brown government. UK governments have for years have remained intransigent on the idea of cleaning up all of the offshore wheezes that favor the City of London.
Mr. Brown has paid lip service to the need for greater transparency and his government has made token gestures to supposedly address the anomalies of the non-domicile rules whereby a person can live and work in the UK for many years and yet, if they can claim to be non-domiciled, only have to pay taxes on that portion of their global income that is brought into the UK for pocket money. There is even the egregious situation where members of Parliament in the UK have claimed and been able to maintain non-domicile status, and thereby avoid having to pay their fair burden of the taxes that they, as legislators, impose on all other UK citizens.
UK governments, of both parties, have shown no interest in dismantling the “supportive arrangements” that encourage foreigners to want to conduct business in London. Indeed during recent years when the City was booming it was often claimed that the regulatory “light touch”, which included keeping quiet about the UK’s special neo-colonial links to many offshore financial centers, had been of great benefit to the overall UK economy.
We shall have to see how firm Mr. Obama is about his desire to tackle offshore shenanigans, but if he is serious, he will find that he will almost certainly bang heads with policymakers in the UK. Mr. Brown and his successors will fight very hard to protect London’s appeal as a financial center by continuing to turn a regulatory blind eye to all of the various financial strategies that are favorable to corporate structures that integrally involve tax-havens, and which have been nurtured as part of London’s financial infrastructure over many years.
